One Reason MGM is Weathering the Macau Selloff

By Ben Levisohn

As I noted earlier today, casino stocks with exposure to Macau are getting hammered today after gaming revenue game in far lower than investors had expected. I also pointed out that MGM Resorts International (MGM) was the only gaming stock with Macau exposure to avoid a loss of 1% or more.

Bloomberg

A possible reason: RBC upgraded the stock to outperform today. And they offered a few catalysts–just one Macau related. They include regaining its New Jersey gaming license, the possibility of new licenses in Maryland, Massachusetts and Toronto, the potential to “monetize” its non-gambling assets, and perhaps refinancing its debt on CityCenter in Las Vegas.

The one Macau related catalyst: A hefty dividend payment from MGM China (02282.Hong Kong) in the near future.

MGM is down just 0.9%, compared to 2.1% for Wynn Resorts (WYNN), 3.3% for Las Vegas Sands (LVS) and 6.8% for Melco Crown Entertainment (MPEL).

Which begs the question: Should investors start looking for non-Macau drivers when deciding which gaming stock to buy?

... there are no other meaningful drivers apart from the growth in Macau, particularly as China's economy continues with it's recovery from it's soft landing and infrastructure projects, such as the high-speed train link and bordergate expansions, continue to bolster Macau visitation. The anticipated 28% year-over-year increase in macau mass-market gaming revenues should be strong evidence of that.

Vegas gaming revenues are mortibund following the "08 crash and look to suffer from the effects of the same saturation of U.S. gaming supply as the east coast as States continue their stampede toward legalizing gaming in practically every corner of the country. Suffice it to say that the U.S. is a "mature" gaming jurisdiction whereas asian gaming is clearly in it's infancy and the culture is clearly pre-dispositioned to excel in casino games without the stigma associated with gaming stateside.

I appreciate your commentary, Ben, but the question at the end of our piece clearly indicates that your understanding of the global gaming industry still need further development.

About Emerging Markets Daily

Emerging markets have been synonymous with growth, but the outlook for individual nations is constantly changing. Countries from Brazil and Russia to Turkey face challenges including infrastructure bottlenecks, credit issues and political shifts. Barrons.com’s Emerging Markets Daily blog analyzes news, data and research out of emerging markets beyond Asia to help readers navigate the investment landscape.

Barron’s veteran Dimitra DeFotis has been blogging about emerging market investing since traveling to India and Turkey. Based in New York, she previously wrote for Barron’s about U.S. equity investing, including cover stories and roundtables on energy themes. Dimitra was among the first digital journalists at the Chicago Tribune and started her career as a police reporter at the Daily Herald in the Chicago suburbs. Dimitra holds degrees from the University of Illinois and Columbia University, where she was a Knight-Bagehot Fellow in the business and journalism schools. She studies multiple languages and photography.